Institutional Differences
CITIC traces its origin in China. The company has experienced a good reception in the country as the level of demand has been high for its products. As such, the rate of growth has been impressive for the company all over the years. Due to the significant success at home, CITIC found it compelling to extend globally and tap the African as well as the Australian markets. The two markets present various opportunities as well as shortcomings that affect the overall performance of the company. Porter’s five competitive factors determine the level of performance for the company in the two markets. The African and the Australian companies face different issues and thus have different abilities to grow. Institutional differences are also presented between the two organizations.
Both Africa and Australia presents various similarities in the institutional aspects. For instance, the two continents largely share the social, cultural, political as well as institutional structures. It is therefore factual that the two continents relate quite well in the informal aspects of conducting business. However, the two continents have major differences in the formal organization and the way that they are managed (Sun et al, 2013). Different formal management policies lead to different results at the end. This is because different procedures are applied in handling CITIC operations in the various countries. For instance, the level formal requirements for the foreign organization and developers differ in the world continents.
Africa readily accepts the foreign investors who they believe bring about development to their countries. This is totally different from the formal culture in Australia. CITC faces more regulations to be able to work and develop structures in Australia. However, the formal structures that African countries expect CITIC to meet are minimal. The approval rate of the infrastructural development is faster in the African continent than it is in Australia.
There has also been fierce opposition to CITIC operations in Australia. This is not the case for the African market. The great resistance and hostility of CITIC in Australia can all be related to the level of competition in the continent. In Australia, there are so many companies that deal with the iron business. Therefore, they feel that CITIC brings about competition to the country at the expense of the local companies (Sun et al, 2013). To protect the interest of the local companies, strict rules are exerted for CITIC operations. On the other hand, the level of competition in Africa is quite low. There are limited iron companies in Africa. Also, the limited companies that exist in Africa cannot meet the demand quantity and quality from time to time. Therefore, CITIC finds a better place of investment in Africa than in Australia.
Due to the high level of hostility in Australia, the level of performance for CITIC in the country have been quite low. This is because the operational costs are so high and the requirements are quite hindering. The high level of competition from peer companies also limits the size of the market and therefore lowers the level of competition. On the other hand, the level of CITIC performance in Africa is quite commendable (Sun et al, 2013). China has been welcomed positively in the entire African market. Institutional leaders have fewer objections to the presence of the Chinese companies in the country. The demand for CITIC services in Africa has therefore been quite high, and this translates to a better performance.
References
Sun, S. L., Zhang, Y., & Chen, Z. (2013). The challenges of Chinese outward investment in developed countries: The case of CITIC Pacific’s Sino Iron Project in Australia. Thunderbird International Business Review, 55(3), 313-322.
